Optimal Degrees of Transparency in Monetary Policymaking

By H. Jensen. Social Science Research Network, 2002

238 citations recorded by the source corpus.

According to most academics and policymakers, transparency in monetary policymaking is desirable. I examine this proposition in a small theoretical model emphasizing forwardlooking private sector behavior. Transparency makes it easier for price setters to infer the central bank's future policy intentions, thereby making current inflation more responsive to policy actions. This induces the central bank to pay more attention to inflation rather than output gap stabilization. Then, transparency may be disadvantageous. It may actually be a policy-distorting straitjacket if the central bank enjoys low-inflation credibility, and there is need for active monetary stabilization policy.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/18cde6c231f583e77ccba23c00a86bf324bbda77

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In Economics and Econometrics

Citations in the corpus

Optimal Economic Transparency (2012, unknown): “j;t = (1 !)E j t t + (1 ! ) E j t xt + (1 ! )sj;t + ! 1 ! E t t+1, (12) where expectations are with respect to the information set Zt 1 j;t .”
The Limits of Transparency (2011, background): “Those intuitive arguments are demonstrated precisely in Jensen (2002) who combines the Faust and Svensson (2001) information structure with a framework in which actual inflation depends on future expected inflation.”
Central Bank Transparency (2002, background): “36 A similar detrimental uncertainty effect is present in a note by Jensen (2000), who adopts a NewKeynesian Phillips curve and considers transparency about supply shocks before (forward-looking) inflation expectations are set (see also Section 2.5).”
Transparency of Monetary Policy: Theory and Practice (2006, background): “When supply or transmission shocks are disclosed, the public could incorporate them into its inflation expectations, which leads to greater inflation volatility and hampers output stabilization (Cukierman 2001, Jensen 2002).”
How Do Central Banks Talk (2001, background): “13 Jensen (2000)”
Are Contemporary Central Banks Transparent About Economic Models and Objectives and What Difference Does it Make? (2002, background): “Recent arguments for and against doing that appear in Faust and Svensson (2001), Geraats (1999), Jensen (2000), and Cukierman (2001) and are partially summarized in the last paper.”